For the past six months, a Senate inquiry has travelled across the country to find out why more than 1,600 bank branches have shut across regional and rural Australia in the last six years.
On Wednesday, the inquiry heard directly from those in charge of the closures — the bosses of Australia’s “Big Four” banks: Commonwealth Bank, Westpac, NAB and ANZ.
The CEOs defended their decisions to fold the branches, saying it was the result of weaker foot traffic and a clear shift towards digital banking.
But that wasn’t all they were grilled over — and their appearances gave us an insight into the future of cash in the economy, the digital boom, and how they plan to offer their services to customers right around the country as the transition continues.
Here are the key takeaways from their day under the microscope.
Cash is no longer king (and hasn’t been for a while)
Commonwealth Bank CEO Matt Comyn, who was the first to appear before the committee, noted the shift away from cash transactions was undeniable.
“Five years ago, 43 per cent of all point of sale transactions were cash. Today the figure is around 15 per cent,” he said in his opening statement.
“And yet every week customers transact more than $18 billion through the CommBank app — an increase of 64 per cent in just two years.”
But that doesn’t mean we’re rapidly approaching the end of the line for our notes and coins, either. Mr Comyn told the hearing the bank — which is Australia’s largest — won’t move away from cash.
“We certainly have no plans to remove cash distribution or the provision of cash in Australia,” he said.
“I don’t think that that’s feasible, and I don’t think that would be desirable, certainly in the foreseeable future.”
The cost of maintaining cash, however, is an expensive exercise.
“We estimate that continuing to support distribution and availability of cash cost CBA approximately $400 million each year, which works out to be roughly $40 for every one of our 10 million customers,” he said.
“Many of our customers don’t use cash though, and these customers cross subsidise those to do.”
Digital transactions are booming
The move away from cash has come with a dramatic shift towards the digital services offered by the big four.
On Wednesday, every CEO told the hearing just how dominant digital transactions are for their banks:
Matt Comyn, Commonwealth Bank: “Our mobile banking app [has] more than 8 million users. On average, they log in 39 times per month. It’s clearly one of the most important, if not the most important feature that customers use.”
Peter King, Westpac: “96 per cent of Westpac customer transactions are now digital. Customers who only use a branch represent around 3 per cent of our 13 million customers.”
Ross McEwan, NAB: “93 per cent of interactions with our personal customers occur through digital channels … only 3 per cent of our personal banking customers do their banking exclusively through a branch, and we’re now processing more than 1 billion payments online annually.”
Shayne Elliott, ANZ: “More than 90 per cent of [aged over 65] customers use at least one self-service option to do their banking, such as our ANZ app, internet banking or ATMs … while most customers prefer digital channels for many of their transactions, branches continue to be important.”
Senators spoke of the need for better infrastructure in the most remote parts of the country, including internet access and mobile phone reception, to ensure those digital services would be consistently accessed, which all four bosses agreed on.
“The provision of digital infrastructure and services is extremely important,” Mr Comyn told the hearing.
Less foot traffic is one reason for the closures
All four bank bosses told the hearing that the majority of branches they have closed have been as a result of reduced foot traffic, or customers coming through the doors, but other factors were also in play.
Mr Elliott from ANZ told the hearing most of its in-branch clients are businesses, not individuals.
“Branches used to be a place where consumers would go — mums and dads, families, individuals — a lot,” he said.
“Today, that’s really not the case. It’s increasingly become a place for small businesses.”
The shift towards digital banking has also had an impact, with Mr Elliott noting that research from the University of South Australia showed older Australians were shifting online.
“They found that most older people like and accept the online banking environment and that Australians over 65 are responding in line with younger cohorts in adopting digital banking,” he said.
NAB’s Mr McEwan said its decision making process in closing branches was linked to its overall activity.
“It’s the drop off [in foot traffic] and customer usage of the branch network,” he said.
“It’s not just purely transactional. It will take a number of factors, but it is around the activity of the branch.
“There comes a point where not enough are coming into a branch to actually make their service viable and particularly as their are other services they can avail themselves on.
“That is just one indicator … that we look at when we’re making a broader decision around a branch.”
But NAB was forced to admit that their planned closing of a branch in Ocean Grove came despite there being an increase in the volume of its transactions in the past three years, after persistent questioning by Liberal senator Gerard Rennick.
“That contradicts a lot of your prior information, though, that you said the reason why you were closing branches was because the number of transactions were decreasing, and yet we’ve got an example here where they are actually increasing,” Senator Rennick said.
“I have an issue with the quality of information that you’re providing to this inquiry and whether you’re genuinely acting in the best interests of the Australian people who underwrite your social licence, but take that as a comment.”
Most banks have paused closing regional branches for now
Since the inquiry began in February, Westpac and ANZ have committed to suspending bank closures, while the Commonwealth Bank has agreed to keep them open until at least 2026.
“We’ve made it very clear we’re committed to staying in regional Australia until 2026,” Mr Comyn said.
But NAB is sticking to its guns, and has shut around 30 regional branches in the past six months — a point Senator Rennick bluntly questioned Mr McEwan about.
“Since we last met in Sale, and that’s about 200 days ago, NAB’s closed more than a quarter of its branches in towns when that was the last bank standing,” Senator Rennick said.
“Why are you closing so many branches so quickly?
“You’re closing, and really under the social licence, you should remain open [as] the last branch in town.”
Mr McEwan replied that NAB made the decision in line with the protocols agreed on through the Regional Banking Taskforce.
“As we’ve seen, where the use of that service is dropping and not being used, we made the decision to actually close,” he said.
Senator Rennick disputed that explanation, before outlining the bank’s Ocean Grove closure as an example.
Australia Post is seen as a substitute
At least, by Westpac, NAB and the Commonwealth Bank, who contribute millions of dollars to fund its Bank@Post service.
ANZ has previously been part of the service, but its customers were unable to use the service after January 14, 2019 after the bank ended its contract with Australia Post.
Bank@Post provides access to banking services at more than 3,400 post offices across Australia, that allows customers or small businesses to make withdrawals, deposits and balance enquiries.
Mr Comyn told the hearing the bank contributes “tens of millions of dollars” towards Bank@Post, while Westpac has committed to a 10-year contract with Australia Post valued over $200 million.
“We believe over 95 per cent of the services we provide over the counter in one of our branches can be provided in Australia Post,” said Mr King, Westpac’s CEO.
“But we acknowledge that there are services that we’re still finding solutions for, and that’s why where we have made the decision to close down branch, we have a long transition period so we can work with those customers, look for other solutions.”
NAB also has a 10-year commercial partnership with Australia Post, which gives the bank a presence in more than 3,400 locations nationally — “more than three times as many than we have ever had”.
Mr McEwan told the hearing it also gave the NAB access to 1,150 in regional locations that have no other bank branch, or never had one at all.
But not everyone agreed with his sentiment — including committee chair Senator Matt Canavan, who accused Mr McEwan of being “out of touch” with its regional customers.
“I think you might need to visit some of these locations where your branches have left because they do not think that Australia Post is a substitute for your services. Absolutely not at all,” Senator Canavan said.
“I take your point that there are more of them now … but for those towns that did have a bank, and now no longer have a bank, the current service offerings of Australia Post are no substitute.
“The suggestion that you’re saying they are, I think shows you a little bit out of touch with what people are thinking in rural Australia.”
Earlier, Senator Linda White pointed out to the Commonwealth Bank that Australia Post branches are also beginning to close, which risks leaving the Bank@Post service — and therefore regional customers — in the lurch.
Where to from here?
The inquiry into the regional bank closures was first established in February, and has travelled the country for public hearings.
Since the beginning of March, seven public hearings have been held, with the committee travelling to Sale in Victoria, Cloncurry and Ingham in Queensland, Carnamah and Beverley in Western Australia, and Launceston in northern Tasmania.
After Wednesday’s hearing in Canberra, the Senate committee travelled to Junee — a regional town in New South Wales that successfully appealed for its branch to stay open after it was earmarked for closure.
There are currently no further public hearings listed after Junee.
The committee is expected to deliver its final report by December 1, however on September 14 the Senate granted the committee an extension of time to report until the final sitting day in May 2024.
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